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Money, money, money

PRIVATE EQUITY, CORPORATE TURBULENCE AND LABOUR REGULATION

Call for Papers
Private Equity, Corporate Turbulence and Labour Regulation

ESRC/Middlesex University One Day Workshop
Monday June 13th  2011, University of Geneva, Switzerland

Concerns over the role of private equity in shaping corporate behaviour were already apparent in the years immediately preceding the Great Financial Crash of 2008. In 2006 alone buy-outs of businesses by private equity organisations amounted to US$ 725bn. – equivalent to the economies of Argentina, Poland and South Africa combined. One quarter of all takeovers before the financial crash were financed by such private equity.

Major household names, such as Nabisco, Carrefour, Gate Gourmet and EMI have already fallen to such venture capital. Private equity finance depends on leverage, or the ability to borrow money to raise more finance. There is thus a dependence on debt, which enormously increases the risk of such investment. Up until the financial crash such risky ventures produced huge returns for the financiers, but after the crash such debt led to huge losses. Harvard University, for example, lost millions of dollars from its funds after it had mistakenly switched to private equity investment as an alternative to stocks and bonds. The result was lay-offs and redundancies of workers to cover the cost, a pattern of events being repeated elsewhere for workers whose employing organisation is dependent on debt finance.

Such ‘short-termism’ appears built in to the private equity model, as the financiers seek immediate gains from their investments at the cost of longer term corporate stability. Employees and their unions are faced with continuous episodes of restructuring as corporations are treated as ‘bundles of assets’ and plants are sold off to make profits or avoid losses. Productive investment in a company becomes less likely, as it is an additional cost to the remote owners. Workers suffer from increased job insecurity as off-shoring and contracting-out is encouraged, while industrial relations and collective bargaining becomes a casualty of corporate instability and ‘invisible’ employers.

This seminar will discuss and debate the continuing problems of private equity finance and corporate turbulence by bringing together academics and practitioners from trade unions, government bodies, employers and NGOs to discuss policy initiatives. The seminar is convened by Middlesex University, London and funded by the UK’s Economic and Social Research Council. It is part of a series of seminars examining global labour regulation in the international economy. Previous seminars reviewed problems arising from the increasing use of contract and agency labour, and migrant workers.

Overview speakers include:

Professor John Grahl (Middlesex University) on Restructuring under the Rule of the Capital Markets: the case of private equity? and
Professor Geoff Wood (Sheffield University), Professor Marc Goergen (Cardiff University) and Professor Noel O’Sullivan (University of Sheffield) with a data presentation on The Employment Consequences of Private Equity Acquisitions: The Case of Institutional Buy-Outs.

Plus speakers from International Trade Union Federations on the trade union response.

If you wish to contribute a paper to this seminar, or wish to attend as a delegate please contact below. We are particularly keen to hear case study presentations on labour-related problems flowing from private equity and institutional buy-outs. Some financial assistance may be available for selected presenters to cover costs of travel and accommodation.

For more information, and registration at the Seminar, please contact Professor Martin Upchurch, Middlesex University, London, UK: m.upchurch@mdx.ac.uk or Denise Arden d.arden@mdx.ac.uk

Further information on the seminar series can be found at Beyond Labour Regulation blog: http://www.globalworkonline.net/blog/private-equity-corporate-turbulence-and-labour-regulation/

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Capitalism in Crisis

BEYOND THE HEADLINES – THE POLITICAL ECONOMY OF THE CRISIS

A workshop organised by the Political Economy Research Group

Tuesday 15th June, 9.00-6.00pm
John Galsworthy building JG1005 and JG1006,
Penrhyn Road campus, Kingston University

World capitalism has entered its worst economic crisis since the inter-war period of the twentieth century. Is this crisis simply due to poor regulation of the financial sector or does it reflect an intrinsic instability in capitalism? Does it mark the end of Neoliberalism? What economic policy conclusions are we to draw from the crisis and what will the new rules for financial regulation, monetary policy and fiscal policy look like? Do we need minor reforms or is capitalism itself in question? The workshop will discuss the causes and the nature of the present crisis as well as the future of economic policy, with a special focus on Europe.

Timetable

9.00     Registration + coffee

9.30     Opening (TBA)

10.00-12.00    The causes and the nature of the crisis, chair: Julian Wells

* John Grahl, Middlesex University:  Financial causes of the crisis

* Engelbert Stockhammer, Kingston University: Neoliberalism, income distribution and the causes of the crisis

* Alan Freeman, Association for Heterodox Economics: The causes of the USA’s long-term economic decline

Lunch

13.30-15.30    The future of monetary and fiscal policy, chair: Paul Auerbach

* Victoria Chick, University College London: The return of Keynes?

* Dominique Plihon, University Paris 13: The new role of central banks in financial regulation

* Philip Arestis, Cambridge University: Current Crisis and Economic Policy Implications

16.00-18.00    The future of economic policy in Europe, chair: Engelbert Stockhammer

* Costas Lapavitsas, SOAS: Beggar your neighbour and thyself

*   Ozlem Onaran, Middlesex University:  The Crisis in Europe, East and West

* Malcolm Sawyer, Leeds University: Can the European Union ever have full employment?

Reception

The Political Economy Research Group:

The Political Economy approach highlights the role of effective demand, institutions and social conflict in economic analysis and thereby builds on Austrian, Institutionalist, Marxist, and Keynesian traditions. Economic processes are perceived to be embedded in social relations that must be analysed in the context of historical considerations, power relations and social norms.  As a consequence, a broad range of methodological approaches is employed, and cooperation with other disciplines, including history, law and other social sciences, is necessary.

Booking and further information:
Participation is free, but registration is necessary at http://fass.kingston.ac.uk/activities/conferences/register/
For more information, please visit: http://fass.kingston.ac.uk/activities/item.php?updatenum=1381
For directions: http://www.kingston.ac.uk/aboutkingstonuniversity/location/howtofindus/

Capitalist Crisis

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This is a great article by Jonathan Wolff which appeared in The Guardian (Higher Education) last Tuesday – Glenn

Greed is good (sometimes); but regulation is better

By Jonathan Wolff

I was rather bemused to read an opinion piece suggesting that I had seen the financial crisis coming. The evidence? A few years ago, I wrote approvingly of some of Karl Marx’s thoughts about the inevitability of capitalism’s economic cycle. As I tell my students, when we are at the top of a cycle politicians and economists boast that they have finally cracked it and achieved sustainable growth. But when we are at the bottom we are told not to worry, the cycle will roll the good times back in.

Marx wrote that capitalism is prone to the most extraordinary type of crisis: that of over-production. Throughout history we have struggled to produce enough to sustain us. But capitalism has flipped into another stage, where sometimes we produce much more than we can consume, or at least pay for. Producers are left with unsold stocks, so reduce output and lay off workers. And then there is even less money to buy produced goods, reinforcing a downward spiral.

Marx also argued that each crisis would be worse than the last. Luckily he was wrong. Attempts to manage the economy can soften the crash. But it is worth understanding his reasons for pessimism. Marx observed that one of the tendencies of capitalism was “the concentration of capital”: the increasing amount of our lives that gets sucked up by the market. Over time more of life, such as childcare and entertainment, becomes “commodified”. Consequently, when the market crashes, it drags more of our lives down with it.

As people in developing countries know, an economic crisis is less serious for you if you can go back to the family farm until things pick up. But if you have to rely on the market entirely for your livelihood, you are especially vulnerable.

So did I predict the then-coming crisis? Well, not really. George Soros once said that he had predicted 10 crises out of the last four. Those who rely on the writings of Marx are in the same position. You can be sure that a crisis is a comin’, but why exactly, and when, is a mystery, until it happens.

On the other hand, it was rather shocking to hear Alan Greenspan of the US Federal Reserve blaming the crisis on a “flaw” he had recently discovered in his ideology of minimal regulation of the free market. He should have come to see me. I could have told him that the problem had been discovered in the early 1700s, by the philosopher and essayist Bertrand Mandeville.

The miracle of the free market – and it is pretty miraculous – was famously captured by Adam Smith: “It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantage.” As if by magic, the market harnesses self-interest for general well-being. Greed is good. Or, as Mandeville put it in his Fable of the Bees, “Private Vices, Public Virtues”.

But here comes the flaw. This is all very well when shopping for tonight’s dinner. If the butcher sells you rotten meat, you’ll go somewhere else tomorrow, if still alive. It is this that keeps the butcher honest. But suppose you are buying meat that won’t be supplied for 20 years? Still want to rely on the greed of the butcher? Thought not. By the time you have found out if he is cheating you, it will be too late to switch supplier. When there is a substantial time lag between purchase and consumption, as there is for pensions, savings schemes and sub-prime debt, the market loses its magic and the purchaser is vulnerable. Regulation might not be a bad idea after all. Otherwise, as Mandeville might have observed, Private Vices, Public Bail-Out.

The Guardian (Higher Education), 7th July 2009, p.6

Online at: http://www.guardian.co.uk/education/2009/jul/07/jonathan-wolff-recession-marx

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The Future of Capitalism 

 

The Financial Times today has a special magazine on The Future of Capitalism. Leading economic analysts, journalists and academics discuss this question in light of the current crisis of capitalism.

 

Contributors include:

Lionel Barber, Gary Becker, Larry Fink, Chrystia Freeland, Alan Greenspan, Francesco Guerrera, Paul Kennedy, Nigel Lawson, Kishore Mahbubani, Kevin Murphy, Edmund Phelps, Amartya Sen, Robert Shiller, Sir Martin Sorrell, Joseph Stiglitz, and Martin Wolf.

  

The Financial Times also has a web site on ‘The Future of Capitalism’, at: http://www.ft.com/indepth/capitalism-future

 

 

Glenn Rikowski

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